Archive for the ‘euro’ Category

In 2008, the Swiss people had pay out massive sums to save the country’s largest bank from collapse due to the toxic assets it had foolishly amassed in the U.S.

The Government bought most of UBS, so that it was in effect nationalised. The Swiss National Bank granted it a large loan and created a “bad bank” into which the toxic assets were dumped. As a result, the Swiss people took on the sizeable risk that the bank would never recover and all their investment would go down the drain.

Yet in 2010, the Government was able to sell its share in the bank at a modest profit. Now UBS has almost repaid the loan from the National Bank, which moreover has agreed to the bank taking back all the assets dumped in the “bad bank.” These have regained considerable value as a result of the recovery of the U.S. housing market.

Neue Zuercher Zeitung worked out that what the people have earned through the substantial interest charged on the loan and the National Bank’s share of the profits on the resurrected toxic assets will by year-end reach 6.5 billion Swiss francs ($7 billion).

Since 2011, the Swiss National Bank also bought huge amounts of foreign currency to prevent the Swiss franc appreciating too much – it had firmed from 1.55 to the euro in 2008 to 1.05. It set a base of 1.20 and announced it would sell any amount of Swiss francs to prevent further appreciation. After nearly a year bumping along the floor, the currency has eased to 1.23, and so when the National Bank decides to mop up the Swiss francs, it will repurchase them at less than it sold them for.

Together with the profit on re-privatising the bank, this would take the earnings of the people in this affair to around 10 billion francs ($11 billion) or more.

So a bank bailout can be profitable, not just a drain on the people’s wealth for the benefit of reckless banks. Why has it worked out this way for Switzerland, while in other countries such as Spain, Portugal and Greece, bailouts caused investors to lose faith in the solvency of the governments themselves?

In Switzerland, public finances were solid, and so foreign investors never doubted the capability of the state to assume the bailout burden. Secondly, Swiss companies are geared to high-quality and precision goods, which are not particularly price-sensitive. A liberal policy on immigration enabled it to import highly-qualified labour to keep standards high.

Not rocket science, but a focus on prudence and quality which has paid off.

Authors from different countries and writing backgrounds are taking part in an internet project called The Next Big Thing. We’re answering the same 10 questions about a work in progress.

My friend from the Geneva Writers Group, Katie Hayoz, asked me to take part. See her blog http://www.katiehayoz.blogspot.ch featuring Untethered, her YA novel about astral projection.

Here’s what I’m up to:

1) The title?The Budapest House: Leaving Home, Leaving Your Past

2) Where did the idea come from?
I met the main character of this book through her husband, and her story fascinated and moved me.

3) Genre?
Historical memoir

4) What actors would you choose to play the part of your characters in a film?
Meryl Streep

5) In one sentence: what is the book about?
A Hungarian Jew traumatised by Auschwitz struggles to find her identity on returning to Budapest, where she finds the property she inherited is inhabited by a sinister individual.

6) Will your book be self-published or represented by an agency?
My agent is Lorella Belli.

7) How long did it take you to write the first draft?
Nine months – but I am not on the first draft!

8) What other books would you compare this story to within your genre?The Hare With Amber Eyes (Edmund de Waal)Burying the Typewriter (Carmen Bugan)

9) Who or what inspired you to write this book?
I share the main character’s concern over confused identity – it nags at me.

10) What else might pique a reader’s interest?
It’s a poignant story of a person who works through a difficult past and finally leaves her “bad home” to realise herself.

The ski slopes in the Italian winter sports resort where I spent New Year were as full as ever, and on the streets the odd fur coat could still be seen. Crisis? What crisis?

But come New Year’s Eve, usually an excuse for unrivalled extravaganza, the hotel served up an aperitif from which alcohol was almost entirely absent. The dining room for the “Cenone”, the traditional New Year Eve’s dinner, was half empty. And when the clock struck 12, scarcely a single firework limped into the sky.

Madrid has turned from one of Europe’s most vibrant cultural capitals into a sad desert where young people make tapas to eat in their homes because they cannot afford to go out.

Northern Europe may not fire the imagination, but five countries in that region are in the top 10 worldwide measured by economic competitiveness, according to the World Economic Forum (WEF). They are Finland, Sweden, the Netherlands, Germany and the UK.

Southern European countries, struggling to cope in the eurozone, languish far back (Spain 36th), but are stabilising their positions due to austerity measures, says the WEF’s latest survey.

In Asia, Singapore, Hong Kong, Japan and Taiwan are the top 20. China may be a powerhouse but competitively it is back in 29th place.

Top of the class, for the 4th consecutive year is Switzerland. This is what the WEF likes there:

Whilst I’ve been away from the UK in Europe, I’ve crossed frontiers a dozen times, and never had to show a passport or identity card, nor declare goods to customs. Eurozone citizens crossing with me did not have to lose money through changing currencies. I lost 8% to the money-changers by having to change sterling.

When I return to the UK on Sunday, I will have show an identity card at Trieste airport as I leave the Schengen zone. When I arrive in the UK two hours later, I will have to queue to show my identity card again.

I’m still trying to discover the supposed benefits of British insularity. Our currency is devalued far more than the euro is. Staying outside Schengen means we are excluded from sharing of security information.

Nobody likes too much regulation, but that’s not the sole preserve of the European Union – national governments do it too. Democratic accountability in the EU? Maybe not great, but Britain has a first-past-the-post voting system that usually gives exclusive power to a party winning around a third of the votes. Not supremely democratic either.

At least I have not only British nationality, but also Swiss, so like most Europeans I can travel around with a small plastic identity card in my wallet rather than a passport. Switzerland doesn’t even belong to the EU, but it has adapted itself to many EU norms and remains safe even after opening up its frontiers within Schengen.

In most respects I love living in England, the place where I was born and grew up, so I’m working hard on my insularity. But for the moment, I don’t quite get it. Just now, I find European harmonisation liberating and convenient.

Germans are said to be scared of a revival of their hyperinflation of the early 1920s, explaining why they don’t want to fund bailouts for eurozone countries. But what Germans remember more is the Depression of the 1930s, when austerity did not work, and even more the 1948 economic reforms which led to the German economic miracle.

Polls show Germans consider the creation of the Deutschmark and the lifting of price controls and other market restrictions in 1948 as one of the two most important events in their recent history (the other being reunification in 1989). Overnight severe scarcities of everything turned into abundance. A bicycle shop which one day had no parts to repair broken bicycles the next day had 60 new ones on sale. The German economic miracle took off and in 1960s growth was still steaming ahead at 9%.

What’s the moral for today? Firstly, in 1948, there were no austerity measures, no cutbacks on public spending. It was economic boom from one day to the next. Today the euro is still a relatively stable currency, for all its recent wobbles. It is firmer against the dollar and sterling than four years ago. It has kept inflation in check, just like the creation of the Deutschmark did in 1948.

So Germans don’t need to force an austerity on others that they did not need in their severest crisis 63 years ago. Nor do they need to worry about inflation.

But what Germans did create in 1948 was a liberal economic market free of distorting price and other controls. The needy eurozone countries have huge distortions in their markets due to all sorts of government measures. Eliminating them overnight, as the Germans did in 1948, may be the salutary example the Germans have to offer.

See A FOOT IN BOTH CAMPS: A GERMAN PAST FOR BETTER AND FOR WORSE by Marcus Ferrar, published July 2012.

As a swathe of Eurozone countries teeter on the verge of financial collapse, Germany with its healthily growing economy gains power and influence in Europe. Its unrivalled strength is already well established.

Little more than half a century ago, Germany also dominated Europe. Germans occupied much of the continent, killed and pillaged with abandon, conducted racial genocide and enforced their will over enslaved peoples with arrogant cruelty.

Are we on the verge of something similar? No we are not, and the reason is that war guilt continues to deter Germans from exploiting their growing power. In the 1930s, they rallied to a hysterical firebrand addicted to violence and killing on a massive scale. Today they elect an Angela Merkel who is dumpy, down-to-earth and understated. She could hardly be more different.

Germans have totally admitted their war guilt. No ifs and buts – they comprehensively assume responsibility. Through their financial generosity to the Soviet Union, Poland and other countries who suffered worst from their wartime savagery, they recognised their obligation to atone.

After World War II, Germans were largely excluded from political or military leadership in Europe. All that was tolerated was that they work hard to rebuild their economy. Which they did with great success, creating a well-functioning free market, a reputation for quality and a social contract for industrial peace.

In the 1970s and 1980s, West Germany was assisting people oppressed by post-war Communism. Now they are helping bail out nations which of their own free will have spent beyond their means. Will Germany continue its generosity to people who have brought their ills upon their own heads?

Most probably yes. Germans still shy away from military involvements and show no inclination to exercise political leadership in Europe. For them, insertion into a European Union with no real leaders suits their low-key ambitions. They are ready to pay the price for its imperfections and concentrate on thriftily building their wealth.

Germans will do as much as they can to influence others towards greater fiscal propriety until disaster looms. Then they will pay up.

The rest of us can be happy that Germans still feel their guilty obligations. It is right that they do, and helpful to us all.

The crisis has knocked the stuffing out of Madrid, not so long ago one of Europe’s most vibrant capitals. This is what I noticed on my visit this week:

– At a time of rapidly rising unemployment, metro fares have gone up substantially.

– Subsidies for the arts have dried up almost completely. At the Casa Encendida cultural centre, an annual festival held for 10 years has just taken place for the last time.

– The bottom has fallen out of Spain’s thriving cinema market: this spring only two films were being made at the main Alicante film studios, compared with a dozen a year ago.

– Artists who had flocked to Madrid from all over Latin America are returning home. Other immigrants are doing likewise.

– At the airport’s spanking new Terminal 4, passengers are few and far between in its vast empty spaces.

– Banks which the European Union is helping to write down their dud property loans are shrinking the balance sheets. So mortgages are suddenly scarce.

– Over-heated Madrid property prices remain unrealistically high. Few sales take place, and when they do, it is an average of 23% below asking prices. Further falls seem inevitable.

– Restaurants are expensive and losing guests. Young people meet at each other’s homes instead of at tapas bars. With the euro, Spain could not devalue to remain competitive, so restaurants complacently allowed their value for money to erode. Few seem to realise the threat to their survival.

Instead of an excited buzz, Madrid is characterised by worried looks, penny-pinching, abandonment of projects, lowered expectations and packed up bags. Where once it was fun, now it is serious.

Madrid has gone quiet. That’s how bad it is – and it could well get worse.

Greeks were the first to organise themselves politically to represent the common interest. Philosophers such as Plato and Aristotle showed the power of reason, which never lost its influence despite religions which insisted knowledge came only from divine revelation. Greeks have thus inspired us over the ages.

Will they now write a third chapter in their history by destroying the vision of a Europe which no longer tears itself apart – as it did at huge cost in human lives in the last century?

Since joining the European Union, Greece acquired a reputation as the member which consistently flouted its rules. Its citizens lived far beyond their means and today show no signs of acknowledging responsibility.

Predictions are that the new elections will favour parties who care nothing for Europe and nothing for the financial ruin they will bring by reneging on the country’s debts. In doing so, they may bring down the euro and perhaps even the European Union.

Europe’s younger generations take the benefits of the European Union largely for granted – that is, freedom of movement and employment, relaxed personal relations, democracy, rule of law, common standards, no passport queues at airports, and, yes, a common currency which facilitates price comparisons and is immensely convenient.

Greeks now risk writing themselves into history as the destroyers of this harmony. They will be remembered long for their selfishness and fecklessness if they choose that path. It is hard to believe Europe’s young people will let them get away with it. But if they succeed, how many will still remember Greeks as pioneers of democracy and philosophy?

If you are one of the millions who visit Istanbul nowadays, you can pay for most things with the euro. Greeks may be about to vote in a government which will take their country out of the common European currency. But Turkey, which does not even belong to the European Union, is already unofficially using it.

Even in the teeming tunnels of the Grand Bazaar, dating back to the 18th century, cash machines offer the euro and dollars besides the Turkish lira. Try getting a euro out of a cash machine in Britain. No chance.

Turkish cars carry number plates with the blue flash on the side used by member countries of the European Union. The plates carry the letters TK, as if it were a member country. Only the yellow stars of the European Union are missing.

The concept of a united Europe may seem tattered to some. But to outsiders such as the Turks, it is still an alluring prospect.